Tuesday, July 14, 2009

The AP reports that the budget deficit has now actually exceeded $1 trillion for the fiscal year, and forecast that it will likely exceed $2 trillion by the fall. That would raise our total national debt to 12.5 trillion. Then they shill for Obama and a second round of stimulus, giving a history lesson that reads like something out of the People's World Weekly.

With the government spending masses of money it does not have and burning out the printing presses (yes, apparently this stuff does grow on trees in Washington, at least when the left does the gardening), and the fiscal year's debt topping a $1 trillion already, the AP tells us that our creditors are getting a might worried:

"These are mind-boggling numbers," said Sung Won Sohn, an economist at the Smith School of Business at California State University. "Our foreign investors from China and elsewhere are starting to have concerns about not only the value of the dollar but how safe their investments will be in the long run."

To summarize the rest of the AP's logic:

1. Yes, we've spent a lot, but we found an economist to say that if we hadn't done all this borrowing and spending, we'd be worse off.

2. Trying to reign in spending now would be a bad idea. A second round of stimulus might well be need.

3. Republicans are complaining about the size of the defecit and the massive public spending. They don't know what they're talking about.

4. The Recession of 1937 occurred because FDR stopped massive government spending. To quote from AP:

History shows the dangers of assuming too soon that economic downturns have ended.

President Franklin D. Roosevelt made that mistake in 1936. Believing the Depression largely over, he sought to reduce public spending and to balance the federal budget, but that undermined a fragile recovery, pushing the economy back under water in 1937.

I'd love to know who does their historical research.

As a threshold matter, the Depression started in 1929. By 1936, most sectors of the economy were back at pre-depression levels, but for unemployment which was down from the peak but still in double digits.

How can one look at the graph above and think that the New Deal - or the second round of "stimulus" from FDR in 1937, healed our economy? The war economy started in 1939, and that is what pulled us out of the Depression. We had virtually full employment with people in America willingly sacrificing for the war effort by working overtime without pay as well as undergoing rationing and price controls.

As to the origins of the 1937 Recession, that occurred directly on the back of FDR's passage of laws empowering unions and his talk of a massive attack on big business. Do you think there might be a connection? This from Conservapedia:

[T]he New Deal had been very hostile to business expansion in 1935-37, had encouraged massive strikes which had a negative impact on major industries such as automobiles, and had threatened massive anti-trust legal attacks on big corporations. All those threats diminished sharply after 1938. For example, the antitrust efforts fizzled out without major cases. The CIO and AFL unions started battling each other more than corporations, and tax policy became more favorable to long-term growth.

Any of that sound similar to today, with Obama poised to war on businesses and expanding the power of unions?

Moreover, the AP completely mischaracterizes Republican opposition to the "stimulus." According to AP, the bases for Republican opposition are the massive borrowing and the failure of all this deficit spending to help the economy recover. They fail to note the biggest Republican complaint that ties all of this together - that the way the left is going about the "stimulus" is not to promote growth or jobs - it was a package of special interest spending that has been ineffective. Less than 1% - all of $6 billion of it - went to small business loans. The rest went to funding such much needed economic problems as saving endangered mice.

One wonders if, when things get predictibly worse, organizations such as the AP will feel any sort of responsibility for it all?